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Automotive Industry

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The automotive industry plays a vital and powerful role in world economies, in terms of the value of its product, the jobs it creates, the income it generates, and the taxes it pays. The industry as a whole employs people at all levels of the occupational spectrum, from highly skilled engineers and scientists to semiskilled assemblers.

This auto mechanic works with specialized tools to repair a faulty part

The modern automobile can be traced back to the 1880s, when German automobile pioneers Karl Benz and Gottlieb Daimler developed a gasoline-powered internal combustion engine. Before Benz and Daimler, inventors working independently all over the world had experimented with self-powered vehicles, but these early steam-powered automobiles were noisy, dangerous, and cumbersome. The gasoline engine proved more flexible than steam engines, as well as more reliable, smaller, and easier to mass-produce.

The design and manufacture of gasoline-powered automobiles began to flourish in the United States. Charles Duryea and Frank Duryea built the first U.S. model in 1892–93. Other early American gasoline powered automobile producers include John Lambert, Gottfried Schloemer, Elwood Haynes, Brady King, and Ransom Eli Olds, whose Oldsmobile became the first commercially successful American-made automobile, selling 5,000 cars in 1904.

Three main factors in early 20th-century America signaled the automobile’s success in this country: the nation’s rapid population growth, its large and expanding middle class, and its geographic vastness. With such potential for demand, American automobile manufacturers needed an efficient and affordable new method of producing their cars. Henry Ford believed that mass-produced cars could and should be affordable to the average person. He wanted to build “a car for the great multitude.” This car was the Model T. It first sold for $950 in 1908 (a price tag most middle-class Americans could not afford), but went down drastically in price as Ford’s assembly line became more efficient; it sold at $360 in 1916 and as low as $290 in 1926. In his efforts to make the Model T more affordable, Ford developed a moving conveyor belt for his assembly line. Speed and efficiency of car manufacturing was greatly improved from this point on.

Henry Ford was also a pioneer in employee management. He believed strongly that workers who were happy and successful at home could be more productive on the job. He implemented the five-dollar day in 1914, a high wage for the time, and lines of men seeking jobs formed outside his factories. The five-dollar day was a profit-sharing plan. In order for a worker to receive his share of the profits, the company required that “he must show himself to be sober, saving, steady, industrious, and must satisfy the staff that his money will not be wasted in riotous living.” Ford also encouraged his workers to purchase Ford vehicles.

Ironically, it was Henry Ford’s good intentions that laid the groundwork for his trouble with unions. Many employees didn’t like the control Ford exercised over their lives and added this protest to already growing discontent over working conditions that often included long days, few breaks, and increases in assembly-line speed by management. The United Auto Workers (UAW) union was founded in Detroit in 1935 and through the years has lobbied the industry for benefits such as pensions, unemployment for laid-off workers, and cost of living wage increases. The largest and longest postwar strike was from November 1945 to March 1946, by the UAW against General Motors (GM).

By the end of World War I, Ford was the dominant American automobile manufacturer with his Model T. Ford’s only potential U.S. competitor at the time was General Motors. General Motors was founded in 1908 in Flint, Michigan, by carriage manufacturer William Durant. By the mid-1920s, a new major competitor to Ford and General Motors joined the market. Walter Chrysler took over the failed Maxwell Motor Company in 1925 and founded the Chrysler Corporation, thus completing the so-called Big Three of the American automobile industry.

During World War II the major automakers stopped producing cars and helped with the war effort by building military vehicles and weapons. After the war, the world output of automobiles skyrocketed from 10 million a year in 1950 to 30 million a year in 1970. During this period the United States lost its dominance in automobile production to the Japanese automakers, who soon became the world leaders.

In the 1970s, Japanese automobile manufacturers made the next big advancement in the industry with their implementation of highly specialized computer automation to the assembly line. Automation had been used before by most manufacturers but not to the extent introduced by the Japanese. The new automation incorporated computer-controlled robotic mechanisms capable of simulating precise human hand and arm movements to a variety of tasks, such as welding, riveting, drilling, and painting. The mechanisms were programmed by physically moving them through each task and precisely recording each movement. The machine then stored this information and repeated it continuously without error. It was not until the 1980s that American manufacturers began employing similar types of automation in their assembly lines.

Words to Know

Aftermarket: All products and services available to consumers after a car is built and sold, such as replacement parts and services.

Alternative fuel vehicles: Vehicles powered by energy other than solely gasoline or diesel, such as by battery packs with electric motors, fuel cells that generate electricity, ethanol, or natural gas.

Big Three: General Motors, Ford, and DaimlerChrysler.

Chassis: Underlying frame of an automobile.

Crossover vehicle: An emerging class of automobiles that combine the softer ride of cars with the cargo capacity and versatility of sport utility vehicles.

Durable goods: Products designed to last at least three years; automobiles are considered durable goods.

Just-in-time: A system where auto parts and modules are delivered to the assembly line just as they are needed, rather than being stockpiled at the assembly plant.

Lean production: Japanese production method that focuses on minimizing the amount of work in progress by using increased automation, quality control by line workers, and smaller just-in-time inventories.

Mass production: Manufacturing process in which a product is manufactured in stages by moving from station to station on an assembly line; allows workers to make several products at once.

NAFTA: North American Free Trade Agreement; pact that calls for the gradual removal of tariffs and other trade barriers on most goods sold and produced in North America, including automobiles.

OEM: Original equipment manufacturer; a company that uses product components from other companies to build a product that it sells under its own name and brand, a common practice in the automotive industry.

Prototype: Custom-built working example.

Environmental regulations and the high price of gas in the 1970s and 1980s ushered a shift in American automobile preferences to the smaller, more fuel-efficient cars made by the Japanese and Europeans. Throughout the 1970s, 1980s, and early 1990s, the American and European manufacturers saw a general decline in the industry, while the Japanese manufacturers still managed to do quite well. After six years of consecutive growth, 1989 through 1991 were dismal years for the U.S. industry. Sales finally went up in the mid- to late-1990s. Today, the automobile industry’s success fluctuates on a quarterly basis, with some of the major manufacturers reporting quarterly losses in the millions of dollars, yet rebounding sharply the following quarter with significant earnings.

In the 1980s, as the global economy became more prevalent and definable, the larger automobile manufacturers became multinational corporations by opening facilities, called transplants, in other countries. Transplant operations allow foreign manufacturers to bypass costly tariffs and unpredictable fluctuations in foreign exchange rates, which are reflected in a vehicle’s price. Further evidence of globalization can be found in Chrysler’s 1998 merger with the German company Daimler-Benz. Other recent mergers include Ford’s purchase of Jaguar, Volvo, and Land Rover; GM’s merger with Saab and other foreign automotive companies. In 2006, Toyota Motor Company surpassed Ford to become the second-largest carmaker in the United States, behind General Motors. Faced with rapidly rising gas prices, and having invested heavily in making SUVs and other larger vehicles, American car manufacturers have struggled to compete. Ford’s sales fell 32 percent and G.M.’s sales dropped by 19.4 percent from mid-2005 to mid-2006.

Detroit remains the headquarters of the major U.S. automobile companies, but many of the manufacturing plants are located throughout the country. The majority of the industry’s employees work in the Great Lakes region, including Michigan, Ohio, and Indiana. Almost 25 percent of all jobs in the automotive industry are in Michigan. While aspects of motor-vehicle manufacturing take place in nearly every state in the country, most of the remaining workers are found in California, Kentucky, Tennessee, Missouri, and Texas.

The U.S. Department of Labor reports that production workers employed by establishments that manufactured complete motor vehicles earned a median hourly salary of $22.45 in 2004 - wages that are among the highest in all industries in the United States. For full-time work, this translates to a yearly salary of $46,696. In addition, many companies cover the cost of approved education courses in the industry. The major manufacturers also offer exemplary benefits packages to their employees. Benefits packages vary from business to business. Auto industry employees can expect health insurance and paid vacation from most employers. Other benefits may include dental and eye care, life and disability insurance, and a pension plan. Yearly bonuses or profit sharing can be added to salaries if the business does well.

Structure

Workers install parts on a car.

The modern automotive industry is massive, complex, and in a continual state of flux. The successful manufacturing of an automobile today - from drawing board to salesroom floor - depends equally upon the expertise of many different professions. There are numerous employment opportunities. If you really want to work in the automotive industry, whether it be in a business, technical, scientific, creative, financial, sales, mechanical, or assembly position, chances are there’s a spot for your specialty in or related to the industry.

Approximately 1.1 million people were employed in the motor vehicle and parts manufacturing industry in 2004, according to the U.S. Department of Labor. About 63 percent worked in firms that produced motor vehicle parts. Twenty-three percent worked in firms that assembled complete motor vehicles and 13 percent worked in firms that produced truck trailers, motor homes, travel trailers, campers, and car, truck, and bus bodies.

The largest automotive employers in the United States are the Big Three: General Motors (which includes Buick, Cadillac, Chevrolet, Oldsmobile, Pontiac, and Saturn), Ford Motor Company (which includes the Lincoln/Mercury division), and DaimlerChrysler (which includes Dodge, Jeep/Eagle, Plymouth, and Mercedes-Benz). The headquarters for each of the Big Three and their divisions are located in Michigan. The major Japanese and some European automakers also contribute to U.S. industry employment with plants in the United States. These include Honda (and its Acura division), Nissan (and its Infiniti division), Toyota (and its Lexus division), Isuzu, Subaru, and Hyundai from Japan.

Automotive parts manufacturers are major employers in the industry. Parts makers employ engineers, scientists, and craft-workers. Parts industry engineers, designers, and scientists work with automakers in designing automobile assembly units in the original equipment manufacturing (OEM) markets. Craft-workers and assembly workers assemble the units and ship them to the automobile assembly plant. Some of the major OEM companies are Dana, Eaton, and TRW.

Aftermarket (or replacement) parts makers employ engineers and scientists to design and develop smaller automobile parts, such as spark plugs, belts, batteries, and filters. Assembly workers and craft-workers assemble the parts manually or operate machinery that does the assembly. Replacement parts suppliers work with both manufacturers and repair shops to supply parts for new cars and for existing models. Some of the major companies in the aftermarket industry include Genuine Parts, Pep Boys, and Federal-Mogul.

Automobile service technicians and collision repairers are employed in repair and maintenance shops, dealerships, and service stations throughout the United States. Many specialty shops are privately owned and hire only highly trained technicians experienced in many types of repairs, equipment, and car models. Technicians working for dealerships specialize in the models their dealership sells and often benefit from free training courses sponsored by the manufacturer or dealer. Many companies that have a fleet of automobiles, such as cab, car rental, and delivery companies, employ full-time service technicians to work on their cars.

Even before a car is manufactured, the manufacturer’s sales and marketing departments plan a promotional strategy. Sales and marketing workers must distribute information on the new cars well in advance of their public introduction. The vehicles built in pre-production pilot plants are used to introduce the new models to dealers and for other promotional activities. Along with the preparation of mass-media advertising, large quantities of product brochures are printed for distribution.

Sales representatives suggest to dealers a variety of sales campaigns that center around styling, engineering, and production features of the new models. Service personnel in the dealerships are trained for any new service and maintenance techniques.

Some service shops (many franchised) specialize in one type of repair, such as mufflers and exhaust systems. There are many chain maintenance shops that specialize in oil changes and minor maintenance procedures. These jobs may require less mechanically skilled workers to do simple, repetitive tasks.

The automotive industry relies on the coordination of four distinct operations: styling, where designers create new automobile looks and features in line with market surveys and acceptable to production engineers; engineering, where the intricacies of design are laid out, from engine requirements to electronics, all under price and quality guidelines; manufacturing, where parts are made and the automobile is assembled according to engineering specifications; and sales, where the final product is marketed and sold.

A new model must go through several steps before it is ready for production. They are market survey, modeling, prototype building, testing, evaluation, correction, design and production of the manufacturing machinery, and final assembly.

The effect a new development plan has on the manufacturing operation of a particular model assembly line varies according to the extent of design change. Some models may keep the same body shape for many years and only have a minor mechanical or aesthetic retooling, requiring little change in the assembly process. Other models may change completely and require major modifications to the assembly process. Manufacturers strive for a seamless switch, called integrated build, from one model production to the next. The largest extent of change comes with the introduction of a new product. Currently, new-product cycles (the number of years until a new product is added to the market) for U.S. automakers is about every eight years; the Japanese automakers are on about a four-year cycle.

Manufacturers use market surveys to forecast customer preferences in model design and features. They poll current owners of their automobiles, as well as people in demographically chosen areas, to collect public opinion of customer expectations, likes, and dislikes in their automobiles. Once a survey indicates a profitable market for a particular product, model makers build exact clay models of this proposed automobile. The models are made to resemble as close as possible the final product in order to give stylists, engineers, and executives the best feel for how the car will look. Clay models also provide the basis for engineering drawings and blueprints.

To ensure that new products or models fit within company guidelines, cost estimators, in collaboration with manufacturing and engineering experts, determine if the proposed new model can be manufactured according to cost and quality standards. They determine whether the new model can be built with existing factory equipment. Cost estimators write proposals detailing the extent of change and costs for a new model. Some new car proposals may not warrant expensive retooling to the factory. In this case, the new model is shelved for later consideration or sent back to the designers and engineers to be redesigned to assimilate better with existing manufacturing equipment.

From the approved model design (shape of car) and the specific dimensions design (dimensions of construction, such as inner panel supports, brackets, joints and flanges, door thickness, and other specifications), factory engineers create blueprints and tools for production. Manufacturing test facilities (or pilot plants) are reworked to handle the new models, while production continues on current models in the main plants. Depending upon the extent of change, new equipment may be needed to accommodate design and manufacturing requirements or existing equipment may be altered for the same purpose.

At pilot plants, mechanical prototypes are designed for early engineering, fabrication, and testing of chassis and engine components for new models and products. Once this basic foundation has passed rigorous engineering and safety tests, operational prototypes closely resembling the appearance and mechanics of the final car are built. Engineers use these prototypes to evaluate durability, functionality, safety, and serviceability of the car.

Before a car is manufactured on the final assembly line, numerous preparatory operations take place. Each part of the automobile, from the side paneling to the gas tank, must be shaped accurately by one or more different forming operations. Nearly all these operations can be divided into four basic operational groups: foundry, machining, forging, and stamping. Foundry operations workers pour molten metal into a mold where it cools and hardens into a casting. Castings are made for such parts as the engine block, cylinder head, or camshaft. When the casting cools, it is removed from the mold and trimmed to remove excess metal. Machining operators, who form one of the largest metalworking groups in the industry, shape the castings even further with tools that cut away excess metal.

Forging workers heat metal stock to shape parts such as crankshafts and connecting rods using forge hammers and presses. Paneling, such as car doors and hoods, is shaped in the stamping process. Sheet metal is placed between the punch (the upper form of the stamp) and the die (the lower form) and then pressed together at great pressure and velocity to form the panel.

Stamping workers perform three basic operations: blanking, piercing, and forming. Blanking cuts the excess metal to the specified size, and piercing punches holes where needed. In forming, the part is given its final shape. This sometimes requires a series of operations that may be performed progressively by a row of presses, each one bringing the part one step closer to its finished form.

At most assembly plants, manufacturing operations for many specific parts are contracted out to other firms. They fall into three main divisions: original equipment manufacturers (OEM), replacement (or aftermarket) parts, and rubber fabricating.

OEMs, the largest of the three, work closely with vehicle manufacturers to design and supply frames, bodies, engines, axles, wheels, transmissions, bearings, valves, bumpers, brakes, fuel injectors, seats, seat belts, airbags, and cushioning. They often sign contracts with manufacturers to produce the specific part for the life of the car. Replacement parts companies produce those parts of an automobile that eventually will need to be replaced, generally within three to seven years. They supply these parts for both new cars and as replacement parts for existing cars. Most parts companies specialize in a particular part, such as shock absorbers, brake pads, exhaust systems, wiper blades, spark plugs, batteries, or oil and gas filters, among others. Rubber fabricating companies supply tires, belts, hoses, valves, and other small rubber parts used throughout an automobile.

The basic assembly process is, for the most part, standard throughout the industry. Hundreds of workers and numerous machines perform thousands of essential tasks in the assembly of an automobile. There are two main assembly lines - body and chassis - and several smaller lines, all of which converge to one main line.

Outlook

The automotive industry continues its slow recovery from the lean years of the late 1980s, when the Big Three laid off thousands of workers and closed entire factories, though it faces new challenges caused by rising fuel prices. The industry is expected to continue to evolve in the first decade of the new century and forecasts call for manufacturing jobs to continue to decline. The U.S. Department of Labor predicts that employment in the motor vehicle and parts manufacturing industry will grow by 6 percent through 2014, compared to an expected 14 percent expansion for all industries combined. Employment in the motor vehicle manufacturing segment of the industry is expected to increase by only 2 percent. Employment increases are expected in vehicle parts manufacturing (6 percent) and motor vehicle body and trailer manufacturing (8 percent).

Much of the recent recovery attempts in the automotive industry have been characterized by cost-cutting measures, including further elimination of manufacturing jobs and consolidation of large companies. In 1998, the German company Daimler-Benz merged with the American Big Three automaker Chrysler in an effort by both companies to increase cost-efficiency. Such mergers often result in the elimination of jobs where efforts would be duplicated under the new organization. Further cuts have also come as American automakers implement lean production measures used by their foreign competitors. Lean production is characterized by increased automation, quality control by workers on the line, and smaller, just-in-time inventories. Today’s automotive industry workers work more hours for less pay than their predecessors did 20 years ago. Still, auto manufacturing jobs pay well compared to other manufacturing jobs: Most automotive production workers who are union members and employed by one of the Big Three automakers make more than $60,000 annually and receive excellent benefits packages.

Competition among U.S. automakers and their foreign competitors will be fierce as the Big Three attempt to lure back aging baby boomers from their Japanese automobiles, while both battle over capturing younger markets.

In efforts to level the playing field and to benefit from cooperative manufacturing (i.e., shared risk and technology), the Big Three have teamed up with their Japanese competitors in so-called joint ventures. Ford and Mazda teamed up to produce the Ford Probe. GM and Toyota worked together to produce the Geo Metro and Toyota Corolla. The Big Three have also joined forces among themselves to research and study technical challenges.

Research and development (R&D) is one area where job prospects are expected to remain strong. Major industry players are currently funding billions of dollars each year in R&D and are likely to continue doing so. Fierce competition forces automakers to produce cars packed with new technology, from amenities to safety features, one step above their rival’s. One major area of competition is in the development of hybrid electric vehicles (HEVs) - automobiles that combine an electric engine with internal combustion. Hybrids have better fuel economy and create lower pollution emissions than conventional vehicles. Honda and Toyota both have HEVs on the market, and American manufacturers have begun to introduce hybrid systems into their vehicles. R&D jobs will be mostly for engineers and scientists in the industry. Stricter air pollution laws are also spurring R&D to rethink how cars are powered.

The automotive industry is strongly affected by the health of the economy. A 10- to 20-percent change in employment from one year to the next is not unusual. Increased fuel prices have had a major effect on automobile sales, so manufacturers will have to struggle to adapt. In general, there is less consumer demand for cars and trucks during economic recession, and manufacturers usually respond by firing or laying off workers.

Declines will occur especially for machine setter, operator, assembler, and tender occupations. Employment of office and administrative support workers will grow slowly due to expanding office and warehouse automation. There will be some job growth for engineers, industrial production managers, business operations specialists, and computer specialists.